I’ll admit it. I have never been a big fan of container self storage, or temporary storage.
At best, I thought we could perhaps use it to plug up a few holes we may have in our facilities and maximize our income.
When I first looked (a number of years ago I admit), halfway decent looking “container” storage was running around $36 psf., which was more than double what I could have built a self storage building for at the time (pre-person-in-the-white-house).
We have even bought projects that had a lot of shipping containers on them. We would sell the containers off and erect self storage buildings where the containers were.
Our thinking was that institutional buyers, our exit strategy in our business plan, will not value and pay the same for income generated by containers as they will for self storage. Also, the containers are not considered real estate, and although we wouldn’t pay property tax on them because they are not a “structure,” neither would our institutional buyers pay for temporary storage at the same CAP rate.
I still feel that way. But in this new reality, in the age of corona, perhaps containers can play a role in our business strategy.
Containers May Test Out Demand For Us
First of all, the price of containers has come down. I am getting quotes at the moment, but suffice it to say, they have come down a lot.
The weird reality for us is our facilities are all over the board. Some are actually doing better. Those facilities have higher occupancy and lower receivables.
Some have lost occupancy, and receivables have gone up.
We are putting the pieces together and will report on the why of that soon.
But what is also a reality is that we have a number of projects in various states of our “value add” strategy, and we are unclear how the “Age of Corona” will affect our projections.
I have to assume a slower lease up to be safe and to pass muster with our partners and lenders.
“Wouldn’t it be great if we could test the demand in some way?”
When I remembered being in a Virtual Boot Camp expounding my knowledge (my mistaken knowledge) about container pricing and what I saw as the pros and cons when I was informed of the actual pricing,
Humm… Couldn’t we buy containers and use them to test the demand we think is there before we spend all the money to build the self storage structures?
Perhaps our management company could purchase them, then move them as needed to test out the demand, project by project. At least until (perhaps another mistake) this “Age of Coronavirus” is over?
We are looking into it now, pricing, and figuring out how this strategy may look.
It appears for us it will not eliminate all our costs in the testing phase, but it will certainly reduce it considerably, and the money we do have to spend will work for most anything else we would do with the site if the demand isn’t there anymore.
In the old days, we would have just updated a feasibility report. But I don’t think anyone can accurately predict today how coronavirus will impact self storage demand in a given submarket in the next 12 months down to the square foot of demand.
So, let’s test our hypothesis. Let’s apply the scientific method to self storage expansion and development.
At least that’s where we are at the moment.
I will keep you informed of any results we get as we continue to learn out loud in this new age.
One thing I know for sure. I would rather be in self storage than any other investment in this “New Reality.”
And perhaps we have found a way to test or assumptions project by project as we move forward.
